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"Insurance Coverage for IP Claims under CGL Advertising Injury Provisions," National Constitution Center Conferences
- 1. Insurance Coverage for IP Claims under
I C f Cl i d
CGL Advertising Injury Provisions
July 24, 2012
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 2. Presenter
Richard D. Porotsky, Jr., Esq.
Ri h d D P t k J E
Cincinnati ^ 513.977.8256
richard.porotsky@dinslaw.com
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 3. CGL Insurance Coverage for IP Claims
Possible duty to defend as “advertising injury”
patent, trademark, trade dress, copyright, misappropriation
trade secrets
“litigation explosion“
“Riddle wrapped up in a mystery inside an
enigma”
Hartford Cas v SoftwareMedia com 2012 U S Dist LEXIS 38731*30 (D Utah Mar
Cas. v. SoftwareMedia.com, U.S. 38731 30 (D. Utah, Mar.
20, 2012) (citing W. Churchill)
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 4. CGL Coverage for Intellectual Property (IP) Claims
Which types of IP cases covered by CGL policies?
as opposed to separate IP insurance
always send to the insurer!
What facts and allegations are important?
What is the impact of rules on duty to defend?
What is the effect of recent policy revisions?
polic re isions?
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 5. Brief Overview of the Duty to Defend
e O e e o t e uty ee d
Duty to Defend Suits -- Very Broad
Defend under reservation of rights if need investigation
One claim-all claims rule
Scope of the pleadings rule
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 6. Duty to Defend ‘98 ISO Form: Coverage B
Personal and Advertising Injury Liability
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 7. Details o t e Duty to Defend
eta s of the uty ee d
One claim-all claims rule:
insurer required to defend "both" a covered negligence claim and
noncovered intentional tort claim
Preferred Mutual Ins Co v Thompson (1986) 23 Ohio St 3d 78
Ins. Co. v. (1986), St.3d
Applied to recent IP case
pp
Trade dress, unfair competition, and breach of contract
Bridge Metal Industries, LLC, et al. v. The Travelers, 812 F. Supp.2d
g , , , pp
527, 535 (S.D.N.Y. 2011)
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 8. Details o t e Duty to Defend
eta s of the uty ee d
“Scope of the pleadings” rule:
Where
“Where . . . the allegations do state a claim which is
potentially or arguably within the policy coverage, or
there is some doubt . . ., the insurer must [defend].”
City of Willoughby Hills v. Cinti Ins. Co. (1984), 9 Ohio St.3d 177, 459
N.E.2d 555, syl. (intentional defamation).
Applied to recent IP case
Complaint “Liberally co st ued
Co p a t be a y construed”
Defend unless “no possible factual or legal basis”
Bridge Metal, 812 F.Supp.2d at 535 (trade dress, unfair comp).
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 9. Details o Duty to Defend
eta s of uty ee d
But the duty is not limitless
No duty if allegations “indisputably outside” scope of coverage
Cincinnati Ins. Co. v. Anders, 99 Ohio St.3d 156, 2003-Ohio-3048, ¶¶ 21
& 51 (homeowner’s negligent failure to disclose defect)
(homeowner s defect).
Applied to recent IP case:
No duty where allegations show no coverage exists
“Conclusory ‘buzz words’ . . . Insufficient”
James River Ins. Co. v. Bodywell Nutrition, 2012 U.S. Dist. LEXIS
16402, *6 (S.D. Fla., Feb. 1, 2012) (excluding trade mark; no
g )
slogan)
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 10. Coverage Content -- ISO Form -- 1986 Terms
“Advertising injury” means injury arising out of one
Advertising injury
of more of the following offenses:
a.
a Oral or written publication…that slanders or libels …
publication that
b. …that violates a person’s right of privacy
c. Misappropriation of advertising ideas or style of
doing business; or
d. Infringement of copyright, title or slogan.
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 11. CGL Insurance Coverage for Patent Infringement?
Early Boundaries Drawn – Patent Infringement
Synergystex Internat'l, Inc. v. Motorist's Mut. Ins.,
Medina Ohio App. No. 2290-M (1994 WL 395626)
1986 ISO form – no patent
Patent infringement = “make, use, or sell,” not advertising
No duty to defend
Weiss v. St. Paul Fire & Marine Ins. Co. (6th Cir. 2002),
283 F.3d 790, 797-98
,
Follows Synergystex
No duty to defend
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 12. Creative, Newer Arguments re Patent Claims
Hyundai Motor Am. v. Nat'l Union Fire Ins. Co.,
Nat l
600 F.3d 1092, 1101 (9th Cir. 2010):
"infringement of a patented advertising method could
constitute a misappropriation of advertising ideas“
Unique case -- Duty to defend patent claim
Dish Network Corp. et al. v. Arch Speciality Ins.,
et al 659 F 3d 1010 (10th Cir 2011)
al., F.3d Cir.
Same – requires a defense
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 13. Proving Coverage as Advertising Injury
Elements required for coverage as “Advertising Injury”
Advertising Injury
(1) an enumerated offense
(2) advertising activity
(3) causal connection / nexus
(4) no applicable exclusions
-Westfield Cos v OKL Can Line (1st Dist.), 155 Ohio App 3d 747 804 N E 2d 45
Cos. v. Dist ) App.3d 747, N.E.2d 45,
2003-Ohio-7151, ¶ 12; SoftwareMedia.com, 2012 U.S. Dist LEXIS 38731,*30;
Bridge Metal, 812 F.Supp. 2d at 536
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 14. Case Study: Westfield v. OKL
COMPLAINT
(in the underlying matter)
Plaintiff Alcoa alleges:
1. This is an action for patent infringement arising under the
Patent Laws of the United States, 35 U.S.C. §§ 271 et seq.; for
federal unfair competition arising under the Trademark (Lanham) Act
of 1946, as amended, 15 U S C §§ 1121 and 1125; and for unfair
1946 amended U.S.C.
competition under the common law…
***
3. Defendant . . . (“OKL”) . . . is engaged in the business of
manufacturing, marketing, servicing, and selling equipment for use
with machinery used in the production of aluminum cans. . .
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 15. 9. By about 1993, Alcoa had developed and was
manufacturing, marketing, and selling retrofit products,
including the ribbed, swept-box shaped, liquid bearing ram
support . . .
10. Alcoa’s can b d
10 Al ’ bodymaking machines containing th
ki hi t i i the
ribbed swept-box shaped fluid bearing ram support and its
retrofit and remanufactured products were and are
appropriately marked with the ‘167 and ‘131 patent
167 131
numbers pursuant to 35 U.S.C. § 287.
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 16. 12.
12 OKL has manufactured and sold . . . retrofit products
products,
and particularly the ribbed swept-box shaped liquid bearing
ram support, without license . . .
***
13. The retrofit and remanufactured liquid bearing ram
supports marketed and sold by OKL and Palmer-Tech are
not marked with any OKL insignia or other marking
identifying OKL as the source of the products. The OKL
liquid bearing ram supports are confusingly similar in
appearance, shape, and design to the liquid bearing ram
support marketed by Alcoa . . .
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 17. COUNT I
PATENT INFRINGEMENT -- ‘167 PATENT
14.
14 Alcoa realleges and incorporates by reference
ach of the allegations of Paragraphs 1-13 above as if
fully set forth herein.
***
COUNT III
FEDERAL UNFAIR COMPETITION
24. Alcoa realleges and incorporates by reference
ach of the allegations of Paragraphs 1 13 above as if
1-13
fully set forth herein.
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 18. 27. The O . . . products, by reason of their identical distinctive
2 OKL f
features and similar overall configuration, create a false
description, representation, or designation of origin, and results in
either actual confusion or a likelihood of confusion among
members of the purchasing public . . .
b f h h i bli
28. Aware of Alcoa’s trade dress rights and in willful disregard
g g
thereof, OKL intentionally and illegally copied the distinctive
features and configuration of Alcoa’s [product].
29. As a result of OKL’s and Palmer-Tech’s wrongful acts, Alcoa
has been damaged by loss of sales, revenues, and profits, and
loss of business reputation and diminished goodwill among the
purchasers and potential purchasers of OKL [products] . .
[products].
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 19. Prong #1 – Enumeration under OKL’s 1998 ISO Form
“14. “Personal and advertising injury” means injury . . . arising out of:
* * *
d. Oral or written publication of material that slanders or libels
e. . . . th t violates a person’s right of privacy;
that i l t ’ i ht f i
f. . . . use of another’s advertising idea in your “advertisement”; or
g. Infringing upon another’s copyright, trade dress or slogan in
your ‘advertisement’.”
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 20. Prong #2 -- Advertisement / Advertising in OKL case
Allegations of advertising ?
“marketing” and customer “confusion”
“Trade-dress infringement necessarily involves advertising
Trade-dress advertising”
Westfield v. OKL, at ¶ ¶ 15-17; see also Bridge Metal, at 542.
Allegation of “Advertisement” required by some policies
web page or traditional print/broadcast “notice”
Westfield v. OKL result:
duty to defend patent and trade dress claims in the suit
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 21. Prong #2 – further policyholder arguments
NGK Metals Corp. v. National Union Fire Ins. Co. (Apr. 29,
p ( p ,
2005), E.D. Tenn. No. 1:04-CV-56 (2005 WL 1115925)
trademark merely appearing on a product is advertisement
product itself is effectively the advertisement
Defense required
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 22. Prong #3 -- Causation
Any “limit” to “inherently advertising”?
all trade dress and trademark claims covered?
“Causal connection" or "nexus“ requirement
often insufficient to preclude duty to defend
p y
OKL, ¶ 18.
“Arising out of" does not require proximate cause
Confusion caused by the policyholder was enough
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 23. Attempts to Limit Coverage for IP Claims
Limiting Court Decisions
Focus on Prong #3 – causation
Or on non-advertising factual “gravamen”
g g
New Exclusionary Language in Policy
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 24. Prong #3 – limits -- cases finding no causat o
o g ts d g o causation
Advance Watch. Co., Ltd. v. Kemper Nati’l Ins. Co , 99 F.3d
d a ce atc Co , td e pe at s Co., 3d
795, 806-07 (6th Cir. 1996) (Michigan law)
No duty to defend trademark and trade dress claims
alleged harm from “infringement not advertising"
infringement, advertising
Now discredited in Ohio and Michigan
Premier Pet Products, LLC v. Travelers Prop. Cas. Co., 678
F.Supp.2d 409, 419-21 (E.D. Va. 2010)
Rejected that trademark inherently involves advertising
Complaint focused on “use” and “sale” of offending products
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 25. Prong #2 & 3: New Exclusionary Language
New Restricted Definitions of Advertisement
Requires a “paid” notice
Feldman L
F ld Law G
Group, P C et al. v. Lib t M t l I
P.C., t l Liberty Mutual Ins., 2012
U.S. App. LEXIS 7787, *3-7 (2nd Cir. April. 18, 2012)
Copyright and trade dress claims re jewelry
May change the result in OKL case & NGK Metals cases?
Def’n requires items “other than a website”
SoftwareMedia.com, at*9 & n.13 & *32
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 26. New exclusion added – 2001 ISO Form
2001 Form Now Excludes:
Personal
“’Personal and advertising injury’ arising out of the
injury
infringement of copyright, patent, trademark, trade
secret or other intellectual property rights.”
“However, this exclusion does not apply to
infringement, in your ‘advertisement,’ of copyright,
trade dress or slogan.“
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 27. Cases u de new e c us o – 2001 ISO Form
under e exclusion 00 SO o
Capital Specialty Ins v Indus Elecs LLC 2009 U S
Ins. v. Indus. Elecs, LLC, U.S.
Dist. LEXIS 95830, at *7-8 (W.D. Ky., Oct. 14, 2009).
misuse of customer lists and pricing
no allegations about advertising in the Complaint
exclusion applied
James River Ins. Co. v. Bodywell Nutrition LLC, 2012
U.S. Dist. LEXIS 16402 (S.D. Fla., Feb. 1, 2012)
No allegations removed this beyond mere trademark infringement
No advertising involved
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 28. Case Study: Hartford Cas. Ins. v. Softwaremedia.com
y
Underlying Complaint Allegations
Microsoft v. SoftwareMedia.com
“This is an action by Microsoft Corporation to obtain injunctive relief and recover
damages arising from infringements of Microsoft’s copyrights and other
violations by SoftwareMedia.com . . . “
“From at least 2007 to the present, Defendants have actively engaged in a
fraudulent bait-and-switch scheme in connection with their sale of
Microsoft products.”
Involves sales of Microsoft software licenses and sales of Microsoft “Software
Assurance,” a less expensive separate software maintenance support product
“which is not a license and creates no license rights.”
Upon information and belief . . . intent to deceive Microsoft and Defendants'
customers, and to retain for Defendants the significant price difference between
licenses and Software Assurance.
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 29. Microsoft v. Softwaremedia.com
First Claim – Copyright Infringement
Repeats and incorporates allegations above
p p g
By this conduct, including advertising activities and
unauthorized use of Microsoft's software … Defendants
misappropriated Microsoft's advertising ideas and style
pp p g y
of doing business and infringed Microsoft's copyrights,
titles, slogans and trademarks
Defendants
“Defendants' have infringed the copyrights in
Microsoft’s software “
Caused or contributed to infringement by customers
g y
who believed they had purchased valid licenses after
“being misled or deceived by Defendants.”
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 30. Microsoft v. Softwaremedia.com
Second Claim – Trademark Infringement
Defendants had a license to use certain Microsoft
marks per Agreement
By engaging in bait-and-switch fraud and other
practices in this Complaint, SoftwareMedia failed to
satisfy conditions for use of Microsoft's marks
Yet, SoftwareMedia continued use of Microsoft's
marks included the stylized 'Microsoft Gold
Certified Partner logo . . . in connection with its
Partner'
deceptive sales practices with the willful and
calculated purposes of misleading customers . . .
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 31. Microsoft v. Softwaremedia.com
Fourth Claim – Fraud
. . . Incorportating allegations above, referencing
the bait-and-switch fraud
Fifth Claim – Breach of Contract
. . . Incorportating allegations above, referencing
the bait-and-switch fraud
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 32. Duty to Defend Ruling: Hartford v. SoftwareMedia.com
y g
“Gravamen of the 2010 Microsoft Complaint”
Tied to “Fraudulent bait and switch scheme”
No duty to defend
“Fraudulent schemes” not listed
Internet ad e se e e c uded
e e advertisement excluded
All on-line with no reference to print ads
Hartford Cas. Ins. v. SoftwareMedia.com, 2012
U.S. Dist LEXIS 38731 (D. Utah, Mar. 20, 2012)
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 33. Prong #4 – Key traditional exclusion: knowledge / intent
This insurance does not apply to:
a. “Personal and advertising
injury”:
(1) . . . C
Caused b . . . th iinsured .
d by the d
. . with the knowledge that the act
would violate the rights of another
and would inflict [i j ]
d ld i fli t [injury].
***
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 34. Prong #4 – Key traditional exclusion: breach of contract
Policies Exclude Claims Arising From Breach of
Contract
Ohio Disc. Merch., Inc. v. Westfield Ins. Co. (Ohio App. 5th
Dist.), 2006 Ohio 4999, ¶ 57
“copyrighted photographs on the bobblehead boxes arguably
constitutes 'advertisement,' as defined in the policy"
no duty to defend because it was contractual
But see Looney Ricks Kiss Architects, Inc. v. State Farm Fire
& Cas 677 F 3d 250 256 (5th Cir 2012)
Cas., F.3d 250, Cir.
defense required despite contract claim
The IP claim could have existed independent of contract
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com
- 35. Questions?
Richard D. Porotsky, Jr., Esq.
Ri h d D P t k J E
Cincinnati ^ 513.977.8256
richard.porotsky@dinslaw.com
© 2012 DINSMORE & SHOHL | LEGAL COUNSEL | www.dinsmore.com